Murerwa offered no solution

Finance Minister Herbert Murerwa announced a supplementary budget that did not address any of the fundamental issues prompting the United States embassy to say that government decision-making remained comatose.

The embassy said Finance Minister did not say in his Z$672 billion supplementary budget:

Whether nominally higher tax revenues (due to inflation) would cover the proposed appropriations, or how much the government intended to borrow through domestic bonds. The government published no new revenue projections.

How and when the government would renormalize fuel imports. (Gas stations had been completely dry for four months. Most motorists depended on the black market.)

When and by how much the government will devalue the Zimdollar. The official rate of Z$824:US$1, less than one-sixth the market rate, caused exporters to sacrifice nearly half their revenue. (They must exchange 50 percent of earnings at the official rate.) A more realistic exchange rate would undoubtedly boost government export receipts.

How the government intended to solve the cash crisis. The shortage of banknotes had made life taxing for all Zimbabweans, distressing for the poor.

Full cable:

Viewing cable 03HARARE1697, Ho-Hum Supplementary Budget

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This record is a partial extract of the original cable. The full text of the original cable is not available.

270734Z Aug 03

UNCLAS HARARE 001697

SIPDIS

STATE FOR AF/S

NSC FOR SENIOR AFRICA DIRECTOR JFRAZER

USDOC FOR 2037 DIEMOND

TREASURY FOR OREN WYCHE-SHAW

PASS USTR FLORIZELLE LISER

STATE PASS USAID FOR MARJORIE COPSON

¶E. O. 12958: N/A

TAGS: ECON EINV PGOV ZI

SUBJECT: Ho-Hum Supplementary Budget

¶1. Summary: The GOZ’s supplementary budget announcement

held no surprises. Spending for calendar year 2003

increased 85 percent, accounting for higher than forecast

(by the GOZ) inflation. In his speech to parliament,

Finance Minister Herbert Murerwa brokered no solutions to

Zimbabwe’s many economic crises. End Summary.

¶2. In what has become an annual ritual, the GOZ announced

a supplementary budget on August 21 that revises the

initial budget’s fanciful spending projections. The

Z$672 billion supplementary budget increases the

original’s budget’s Z$784 billion allocation to Z$1,442

billion. The GOZ’s inability to pare inflation down to a

projected 96 percent (it’s currently 400 percent) has

meant higher outlays in local currency. The pay of most

civil servants has more than doubled.

Controversial Issues Not Addressed

———————————-

¶3. The Finance Minister did not say:

– whether nominally higher tax revenues (due to

inflation) would cover the proposed appropriations, or

how much the GOZ intends to borrow through domestic

bonds. The GOZ published no new revenue projections.

– how and when the GOZ would renormalize fuel imports.

(Gas stations have been completely dry for four months.

Most motorists depend on the black market.)

– when and by how much the GOZ will devalue the

Zimdollar. The official rate of Z$824:US$1, less than

one-sixth the market rate, causes exporters to sacrifice

nearly half their revenue. (They must exchange 50

percent of earnings at the official rate.) A more

realistic exchange rate would undoubtedly boost GOZ

export receipts.

– how the GOZ intends to solve the cash crisis. The

shortage of banknotes has made life taxing for all

Zimbabweans, distressing for the poor.

Comment

——-

¶4. Last week’s budget announcement reinforces the

perception that GOZ decision-making remains comatose.

While there are vested fuel interests that stand to lose

market share when multinationals reenter the game, the

GOZ has little to lose by raising the official exchange

rate (few can buy dollars at Z$824:US$1) or printing

larger banknotes (a matter of pride). Somehow it is

impossible for reasonable proposals from the Ministry of

Finance or Reserve Bank to move up the line.

Sullivan

(15 VIEWS)